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tv   Nightly Business Report  PBS  May 1, 2012 6:30pm-7:00pm PDT

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>> this is n.b.r. >> tom: i'm tom hudson. "sell in may and walk away from stocks?" some on wall street say," not so fast." >> susie: i'm susie gharib. chrysler sales revved higher in april, thanks to the jeep grand cherokee. >> tom: and what the facebook stock sale could mean for california's economy. we talk with state treasurer bill lockyer. >> susie: that and more tonight on n.b.r.! we begin tonight with the markets. investors kicked off the first day of may on the upside. the dow rose 65 points, the nasdaq added four, and the s&p up almost eight points. suzanne pratt looks at whether a wall street saying about may will prove true this year.
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>> reporter: today was a great start to what could be a rough stretch for u.s. stocks. still, nervousness about may persisted among professional investors on wall street. >> there is a certain amount of trepidation. first of all, everyone knows this is a weaker time seasonality-wise. there's the old saying, "sell in may and go away." >> reporter: investors may be particularly worried about this summer because you may remember may and june in the last two years was downright awful for the stock market. and there's plenty of historic data backing up that wall street adage-- sell in may and go away. since world war ii, may has returned an average of only a third of 1%. that compares to average gain of 0.67% for all months. sure, there are years when stocks shine in may. but some market pros say 2012 won't be one of them. >> this time around, i think that there still are an awful lot of headwinds that investors have to contend with, from the
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european sovereign debt crisis to leadership changes in europe to slowing of chinese g.d.p. >> reporter: still, others think this may might be an exception. after all, it's a presidential election year, historically a good stretch for stocks. suzanne pratt, "nightly business report," new york. >> reporter: still ahead, why did investors shrug off news british lawmakers consider news corp c.e.o. rupert murdoch unfit to run his media empire. "nightly business report" is brought to you by: captioning sponsored by wpbt >> tom: big questions today about the leadership at two big companies-- news corp and chesapeake energy.
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susie, we'll have more on the issues swirling around both companies in just a moment. >> susie: meanwhile, tom, occupy wall street hoped to breathe new life into its movement with may day protests today. demonstrators marched through manhattan's financial district and protested in front of several large banks and media outlets, but in smaller numbers than marches last fall. similar protests took place other cities, including chicago, san francisco, and los angeles. he built one of the world's largest media empires. but today, rupert murdoch is being called "not fit to run" a global company. that's the conclusion of a committee of british lawmakers looking into wrongdoing by murdoch-owned newspapers in the united kingdom caught up in the phone hacking scandal, when reporters illegally obtained voicemails from celebrities and politicians. darren gersh reports on this very public slap in the face for news corp's very famous c.e.o.
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>> reporter: news rupert murdoch is considered by a committee of parliament to be unfit to run a global company did not affect news corp shareholders where it matters most. news corp shares closed the day near a 52-week high. >> i think what it comes down to is that most investors realize that murdoch is not likely to pass on the c.e.o. role to his son james, and if for some reason, rupert murdoch had to step down as chairman or c.e.o., the new c.e.o. would be chase carey, the current chief operating officer, and he's widely respected. >> reporter: but rupert murdoch remains c.e.o. and chairman, and that is trying the patience of investors concerned about corporate accountability. >> we've been using "corporate crisis" for six to 12 months. i don't know whether we need a new word now, because i wasn't expecting that. no one was expecting to hear those words from the u.k. parliament regarding rupert murdoch today, and that has thrown the company into crisis. >> reporter: parliament's culture, media and sport committee concluded murdoch turned a blind eye to what was going on at his company. but in a statement, news corp
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fired back. "news corporation regrets, however, that the select committee's analysis of the factual record was followed by some commentary that we, and indeed several members of the committee, consider unjustified and highly partisan." still, shareholder activists are pressing for a vote to limit murdoch's control of the board and bring more accountability to one of the world's true media empires. >> the board has been saying for six months, since the annual meeting where they got the unprecedented vote against them, that "watch this space." and investors have been watching for six months and they've heard nothing. >> reporter: some investors would be happy to see chase carey take over as c.e.o., since his roots are in the fast- growing entertainment business, not the slow-growing and now scandal plagued newspaper business. >> the best thing that could happen if murdoch were to step aside and chase carey were to take over is to just rename the whole puppy "fox," because that's all that wall street cares about. >> reporter: darren gersh, "nightly business report," washington. >> tom: a leader in the u.s. energy industry has agreed to give up some control of the company he heads. aubrey mcclendon will step down
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as chairman of chesapeake energy, but he remains as c.e.o., despite questions over his personal stakes in thousands of the company's drilling wells. mcclendon courted controversy through a program at chesapeake allowing him to invest in oil and natural gas wells developed by the company. he received up to a 2.5% interest in the wells. mcclendon used those stakes as collateral to borrow more than $1 billion to buy more. adding to the controversy, mcclendon borrowed some of that money from banks and private equity firms doing business with chesapeake. mcclendon has agreed to end the program early. the deals have caught the eye of the i.r.s., which is "reviewing certain issues" in connection to the program, according to the company. chesapeake has been among the energy leaders using fracking to free oil and natural gas from shale rock. the practice has helped increase natural gas supplies to record levels, pushing prices to near ten-year lows. low gas prices and worries about corporate leadership have pushed
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chesapeake stock down 40% over the past year. shares rallied today after the firm announced it would split its chairman and c.e.o. positions. david webber is an associate professor of law at boston university, where he concentrates on securities regulations. professor is the right move to separate the roles of chairman and ceo like they've done at chesapeake. >> i do think it's the right move. separating them is a step in the right direction because it's a way to restore some accountability within that company. there's a constant concern within corporate governance that ceos and managers are running the company more with an eye towards their own benefits than shareholders and a great way to restore the accountability is having oversight by a board and
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separating the chair and ceo role is the step in the right direction. >> tom: some called it the imperial chief executive office and no one emplifies that more than rupert murdoch and heard about his troubles in the u.k. would it be better off if it were able to separate the roles? >> they are still combined and i also think it would be a step in the right direction. when news corps had to conduct its own internal investigation as reports of hacking were coming to light and the first reports for the company were about well, seemed to be one rogue reporter, etcetera. we might have more confidence in share holders in the company if we had an independent chair from the ceo and have more confidence those kinds of investigations are being conducted in the interest much the shareholders rather than in a way to protec
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the murdoch for example. >> tom: at avon the share price was down 8% today. the former ceo is sticking around as chairman. does it present a conflict? >> it can potentially present a conflict when you have the former ceo still sticking around in the role of the chairman. but i still think that it's better than being in an imperial ceo situation where you have the ceo and chair person one in the same. certainly there could be potentially be benefit in the new chair who is andrea young sticking around as chair knows about the company but it could have been more to have a clean break given the past performance of avon. it remains to be seen whether the new ceo and chair will work
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out a relationship for the shareholders. >> tom: lots of high drama in the boards in rooms. david we'll leave it there. david webber is along with us from boston university. >> susie: we continue our series on the "facebook economy." when facebook goes public later this month, the state of california expects the stock offering will be a big windfall for the golden state. with us now to talk about that, california state treasurer bill lockyer. bill, we saw with the google ipo it was a big boost to the california economy. what are you expecting from
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facebook? >> well, there still are a lot of unknowns. when does it occur, how big will it be, are their stroke restrictions on resale. how many shareholders actually live in california a lot and we're delighted to have this company join the other great california silicon valley public companies but there are those unknowns. we do know with respect to google that it took about two years for there to be a su substantial bump in capital gains income and income forwar for the state of california in 2006. it's estimated there's two and a half billion spread over several years of additional state revenue. i'm delighted of course. >> susie: what we've seen with other hot ipos when they go public that this also creates a growth of a lot of start-up
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businesses. what could this entrepreneurism mean for silicon valley and for the state economy? >> well, that's the key to the innovative culture around silicon valley and it's been happening for years and years and we expect this will continue to generate and incubate more of that kind of start-up in business growth. >> susie: and you know, when we talk about the facebook economy a lot of people talk about the multiplier effect as investors sell their stock and get profits they spend it and buy lots of other things. that's got to be have a significant impact on california. how can that help your state finances? >> well, it certainly means a lot in the real estate market because a lot of folks go out and buy a new home when they have this kind of income. for us of course it does mean a
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variety of forms of revenue in business improvements and new jobs being created throughout this area and so we're -- it's hard to measure those exactly but they're not insignificant. it may take a year or two before we actually see them realized but we're hoping -- i'm hoping, the legislature will use any bump in capital gains for some debt repayment or other one-time spending not build it into program expenditures. >> susie: we have a few seconds left. you mentioned housing and real estate. there are a number of real estate agents that are getting ready for a surge of new buyers. do you think this could be a boost for the housing market in california? >> well, there still are a number of areas that are depressed but the coastal areas in particularly where this company and a lot of its employees work are the areas that have been picking up and
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improving pretty substantially. i hope that will continue. >> susie: all right. we'll see what happens. bill lockyer, california state treasurer. >> reporter: i'm diane eastabrook in rowley, iowa. tomorrow, i'll tell you how twitter is transforming the corn belt. >> tom: chryslers were hot sellers in april, general motors and fords, not so much. the month came down to two sales stories for auto makers-- new model demand and heavy incentives. chrysler was the star, up 20, largely on the popularity of its
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new jeep grand cherokee, and heavy incentives driving sales of the rest of its lineup. but sales slipped at both g.m. and ford. as for imports, new models helped volkswagen to a 31% sales gain. honda and toyota sales also higher, as their inventory issues due to last year's earthquake and tsunami faded. >> the big movers for them this month were camry, which was redesigned about six months ago, and the toyota prius. the main prius model hasn't been redesigned, but they have two new versions-- a larger "v" and a smaller "c," and so that added about 8,000 extra units for just that model and really helped their numbers. >> tom: while gas prices have come off their recent highs, thomas says fuel efficiency still plays a big role in most buyers' decisions. >> susie: things don't look pretty for avon. profits at the world's biggest door-to-door cosmetics seller dropped a whopping 80%. new c.e.o. shirilyn mccoy came on the job last week and said she's taking a fresh look at all of avon's operations.
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today's results suggest avon is in for a makeover. for the first quarter, avon earned six cents a share, way below the 28-cent estimate and last year's results. the company blames the poor performance on problems in brazil, one of avon's biggest markets, restructuring costs related to layoffs, and rising costs for things like packaging and fuel. mccoy told analysts that her priority is "stabilizing the business". tom, avon shares fell $1.73 or 8% today to just under $20 a share. >> tom: we've got a technical analysis of avon shares on our web site. it's on the home page, nbr.com. you'll find it on the blog. let's take a look at tonight's "market focus." new data on u.s. manufacturing was enough to ignite buying
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interest. the institute of supply management index was up in april to 54.8. any reading over 50 shows a growing business. it's at its highest level in almost a year. the s&p 500 started climbing after that report was released at 10:00 a.m. eastern time. the index finished up with a gain of just over a half- percent. the dow industrial average's half-percent bump higher was enough to put the dow at its highest close in more than four years. behind today's broad market rally-- the energy sector jumped almost 1.5% as oil prices closed over $106 per barrel. the financial sector rose more than 1%, followed up a more muted rally in the materials sector, up a half-percent the dow climbed to a multi-year high, despite the drag from pfizer. earnings were stronger than expected, but down from last year as its best-selling drug, lipitor, faced generic competition. earnings per share came in two cents better than estimates. this is the first full quarter
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without lipitor sales. the drug lost its patent protection last fall. lipitor sales plunged 71%, thanks to generic versions. the stock fell a fraction. just last week, it was at a 52- week high. shares have been rallying as pfizer concentrates on its drug- making businesses. last week, it sold its nutrition unit to nestle for almost $12 billion. it's also considering separating its animal health unit, possibly in a stock spin-off. it is a private equity deal for restaurant chain p.f. chang's china bistro. the company will go private in a $1 billion buyout as it works to turnaround its struggling business. shares shot up 30%, and closed just above the buyout price of $51.40 per share. that indicates the market thinks a higher price could be coming. but the chain can entertain competing buyout offers for the next month. another struggling business is sears.
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it's talked about selling its lands' end unit, while it closes some of its stores in an effort to turn around sales. today, the company told shareholders, while sales continue dropping, they are not dropping as much as feared. that has fueled optimism first quarter results will be better the anticipated. shares popped 15% on that outlook, the best among s&p 500 stocks today, and it's the best this year. the price has almost doubled. we saw a couple of agriculture- focused firms report stronger than expected earnings, helping their stocks move higher. archer daniels midland jumped more than 7%. while earnings were stronger than predicted, the company was hurt by an over-supply of ethanol. still, recent cost-cutting moves resulted in better than anticipated savings. ag equipment maker ag-co jumped 6%, while sales growth continued in north america and europe. our exchange-traded fund market flash shows up across the board of the most actively traded e.t.f.s. the merging markets fund rose the most, seven-tenths of a percent.
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and that's tonight's "market focus." >> tom: america's biggest trading partner has seen the economy get smaller as mining and energy production fell highlighting the importance of natural resources to canada and the health is important for u.s. investors with a fifth of merge exports going north to canada. she's with us from desjardins. the u.s. has seen it's own
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economic slow down. what about the shape of canada's economy. >> i guess the growth in the canadian economy for 2012 anand '13 but numbers were disappointing in april. >> tom: among the numbers was retail falling and consumer confidence has gotten dinged a bit in canada. what has caused that what are canadian consumers worried about? >> i think essentially job prospects. there are indications there could be a slight declaim in job prospect and i think this has a major impact on the consumer confidence. >> tom: we've obviously seen global concern when it comes to finance and business related to europe. that so some degree has been
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pointed to here in the u.s. for financial constraints and what about in canada and banking industry are you concerned about your exposure to european sovereign debt. >> in terms of the banking industry overall i would say that the exposure would be moderate compared to other banks around the world. but it is a risk that has to be very well monitored by the banking industry globally. >> tom: the banking in of industry in canada survived over the last four years in very good shape certainly relative to the u.s. banking because of restrictions has it hurt the canadian economy and financial industry. >> i would say the canadian financial industry is in relatively good shape compared to other coutries. and the reason for that is that
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there's good coordination of the industry and stronger regulations and some sort of conservatism in the way the big institutions are managed. these are some of the explanations around the solidity of the financial institutions in canada and it helps consumers and businesses to continue to have reasonable growth and confidence during the financial crisis. >> tom: our guest moniqueleroux running the canadian >> susie: massive student loan debt has become a hot campaign issue. tonight's commentator says student debt isn't the problem; it's college costs that are killing us. here's todd buchholz, author of "rush: why you need and love the rat race." >> the vaudeville comic henny youngman had a classic routine. someone asks him, "how's your wife?"
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he replies, "compared to what?" that's what i ask when someone moans about soaring college costs. what is a college these days? sure, it's professors, students, backpacks and occasional keg parties. but increasingly, it's also fitness centers that rival anything used by the u.s. olympic team. colleges compete by spending enormous sums on lifestyle promises. now, i'm all for fitness centers, but i wonder whether families will ever be able to afford the kind of rolling- hilled country club campus that shows up on brochures, looking like faber college from the movie "animal house." we may need to redefine our expectations for what colleges look like and who runs them. in the past 20 years, colleges have gone on a hiring spree of administrators-- up about 40%; actual classroom professors, just 18%. and pay for administrators has jumped 70% faster than for professors. what are these people doing? maybe they're processing drop- out forms, because 60% of students fail to graduate in
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four years. the old model of colleges might have worked in keg party comedies, but nowadays, the laughs are on parents and young people. i'm todd buchholz >> susie: good night, tom, and everyone. we'll see you online at nbr.com, and back here tomorrow night. "nightly business report" is brought to you by: captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org
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>> join us anytime at nbr.com. there, you'll find full episodes of the program, complete show transcripts and all the market stats. also follow us on our facebook page at bizrpt. and on twitter @bizrpt.
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